DC Circuit Court Vacates Rule 151A


On July 12, 2010, the DC Circuit Court of Appeals (the “Court”) reissued a prior opinion and vacated Rule 151A (the “Rule”), which was approved by the Securities Exchange Commission (the “SEC”) on December 17, 2008, on the grounds that the SEC’s efficiency, competition and capital formation analysis under Section 2(b) of the Securities Act of 1933, as amended (the “Securities Act”) was arbitrary and capricious. The Rule would have brought indexed annuities within the definition of “security” under the Securities Act and within the SEC’s jurisdiction. The decision to vacate the Rule came shortly after the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) by the House of Representatives. The Act contained a provision granting jurisdiction over such products to state insurance commissioners.1 The Court’s decision also came a year after the first legal challenge relating to the Rule had been filed.2

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